The Two-Income Trap (33 page)

105
U.S. Department of Energy, Office of Transportation, “Automobile Affordability, 1979-1999,”
OTT Fact of the Week
121, March 20, 2000. Available at
www.ott.doe.gov/facts/archives/fotw121.shtml
[12/19/2002].

106
Patricia S. Hu and Jennifer R. Young,
Summary of Travel Trends: 1995 Nationwide Personal Transportation Survey
(Washington, DC: U.S. Department of Transportation, Federal Highway Administration, December 1999), Table 20, Distribution of Vehicles by Vehicle Age and Vehicle Type, 1969, 1977, 1983, 1990, and 1995 NPTS (percentage of total vehicles).

107
BLS,
Consumer Expenditure Survey: Interview Survey, 1972-1973,
Table 5;
Consumer Expenditures in 2000,
Table 4.

108
“Volvo Saved My Life,”
Volvo.com
. Available at
http://new.volvocars.com/whyvolvo/why_save_my_life.asp
[12/19/2002].

109
Melanie Haiken, “Car Seat Safety: How to Choose and Use a Car Seat: Why Does my Child Need a Booster Seat?”
Parentcenter.com
,
http://www.parentcentercom/refcap/39413.html
[12/19/2002].

110
Insurance Institute for Highway Safety,
Fatality Facts—Children, 2001
(Arlington, VA: IIHS, October 2001).

111
Bureau of the Census,
Historical Income Tables—People,
Table P-36.

112
BLS,
Consumer Expenditure Survey: Interview Survey, 1972-1973,
Table 5. In 1972/73, the average family of four spent $160 (inflation adjusted to $640) on private health insurance (not including expenditures on Medicare). However, 38 percent of these families spent nothing whatsoever on health insurance, typically because they were uninsured, although in some cases because they were covered by a government program such as Medicaid or because they had a particularly generous employer who paid the entire bill. In order to get a more accurate picture of the average health insurance burden on a middle-income, insured family (who would not typically qualify for Medicaid), we have included in our calculation only those families who spent at least $1 on health insurance. For our estimate for a middle-class family’s typical expenditures on health insurance, the calculation is as follows: $640 (average expenditures on health insurance) divided by 62 percent (the portion of families who reported expenditures on private health insurance) = $1,027.

113
Average mortgage principal and interest paid by a home-owning, four-person family; for methodology, see note 64 above. BLS,
Consumer Expenditure Survey: Interview Survey, 1972-1973,
Table 5.

114
BLS,
Consumer Expenditure Survey: Interview Survey, 1972-1973,
Table 5. As we noted earlier, the average family of four actually owned 1.7 vehicles in 1972/73 and 2.5 vehicles in 2000. We also noted, however, that the average family of four has 2.5 adults. A family with more than two adults is presumably more likely to have more vehicles, while a family with two or fewer adults would have fewer vehicles. Since our focus here is on the nuclear family with two adults and two young children, we assume, for simplicity’s sake, that the family owns just one car in 1972/73 and just two cars in 2000. We will use this calculation again in chapter 5 when we calculate the postdivorce budget.

115
Claire M. Hintz,
The Tax Burden of the Median American Family,
Tax Foundation Special Report 96 (Washington, DC: Tax Foundation, March 2000),
Table 1, Taxes and the Median One-Income American Family. For our 1973 calculation, we apply the Tax Foundation’s estimate of the tax rate for a single-income family in 1975. This report has the only data we can locate that attempts to estimate the entire state, local, and federal tax burden on middle-income families, using a consistent methodology over the past forty years. Most other estimates only account for federal income taxes, which underrepresents the true tax burden on families, and most offer only current estimates, without historical context. In addition, this report differentiates between the tax burdens on two-income and one-income families, which is critical for this analysis. We have made a few minor adjustments to the Tax Foundation’s basic methodology. First, we have omitted employer-paid payroll taxes from both the income and the tax burden calculations. This does not change the comparison between 1973 and 2000 in any substantial way, but it prevents us from the need to gross up income by including the employer’s contribution to payroll taxes, only to have that income deducted on the tax side. Second, we use median wages for a fully employed male, rather than median income for a single-income family, as the basis for applying the taxes, in order to be consistent with our model—a married couple in which the male was employed. The results should be quite similar either way: In 1975, the Tax Foundation reported that the median income for a single-income family was $12,560; according to the U.S. Census Bureau, median earnings for full-time, year-round male workers was $12,934 that year—a difference of less than 3 percent—which would indicate that a family living on median earnings for a fully employed male would be in roughly the same tax bracket as the family living on the median income for all one-income families. Third, we have adjusted the Tax Foundation calculations by omitting imputed corporate taxes, again avoiding the problem of overstating income by including an imputed distribution from corporate profits only to have that amount then deducted in taxes. Imputed corporate income taxes are from Ed Harris, David Weiner, and Roberton Williams, “Effective Federal Tax Rates, 1979-1997” (Washington, DC: Congressional Budget Office, Tax Analysis Division, October 2001). We have not included any itemized deductions, since average tax burdens already account for average deduction levels, and there would be a considerable risk of double-counting a family’s deductions.

116
Bureau of the Census,
Historical Income Tables—People,
Table P-36.

117
BLS,
Consumer Expenditure Survey, 2000,
Table 1400. For methodology, see note 64 above.

118
Kristin Smith,
Who’s Minding the Kids? Child Care Arrangements: Spring 1997,
Bureau of the Census, Current Population Reports P70-86 (July 2002), Table 6, Average Weekly Child Care Expenditures by Employed Mothers of Children 5 to 14, Spring 1999. Day-care costs are calculated from average child-care costs for mothers employed full-time with a child aged five to fourteen, and preschool costs are calculated from average child-care costs for mothers employed full-time with a child under five.

119
BLS,
Consumer Expenditure Survey, 2000,
Table 1400. The calculation of health insurance and car costs was made in the same manner as the calculation for 1972/73; see notes 112 and 114 above.

120
Hintz,
The Tax Burden of the Median American Family
. For our 2000 calculation, we apply the Tax Foundation’s estimate of the tax rate for a two-income family in 1998, the most recent year for which this calculation was available. Because they own a more expensive home than their one-income counterparts in the early 1970s, the two-income family pays more property taxes in 2000, in addition to higher income taxes. See note 115 for an explanation of methodology.

122
Only 52 percent of all families have a retirement account. Ana Aizcorbe, Arthur Kennickell, and Kevin Moore, “Recent Changes in U.S. Family Finances: Evidence from the 1998 and 2001 Survey of Consumer Finances,”
Federal Reserve Bulletin,
January 2003, Table 5B, Family Holdings of Financial Assets, by Selected Characteristics of Families and Type of Assets, 2001 Survey of Consumer Finances.

1
Rosalind C. Barnett and Caryl Rivers,
She Works/He Works: How Two-Income Families Are Happier, Healthier, and Better-Off
(San Francisco: HarperSanFrancisco, 1996), pp. 2, 5.

2
In 1973, the median income for a woman who worked full-time, year-round was $6,488, or $21,913 adjusted for inflation to 2000 dollars. U.S. Census Bureau, Table P-36, Full-Time, Year-Round Workers (All Races) by Median Income and Sex: 1955 to 2000. Available at
http://landview.census.gov/hhes/income/histinc/p36.html
[1/10/2003]. A longtime stay-at-home wife with fewer skills might have earned somewhat less than the median income on entering the workforce. Such differences, however, should be relatively modest. In the late 1970s, for example, women in their early twenties (who were presumably less experienced than average) earned only 12 percent less than the median income for all working women. In addition, middle-class women generally had higher levels of education than many lower-income working mothers. U.S. Department of Labor, “Highlights of Women’s Earnings in 2000,” August 2001, Table 13.

3
Unemployment Insurance Fact Sheet, Department of Labor. Available at
http://workforcesecurity.doleta.gov/unemploy/uifactsheet.asp
.

4
There have been conflicting studies of what sociologists call “the added worker effect,” that is, the magnitude and direction of changes in workforce participation of wives of unemployed men. For example, some researchers have examined whether a wife’s labor force participation increases in the same year of or in the year immediately following the husband’s unemployment, and found no significant effect. See, for example, Tim Maloney, “Unobserved Variables and the Elusive Added Worker Effect,”
Economica
58 (May 1991): 173-187; see also W. Jean Yeung and Sandra L. Hofferth, “Family Adaptations to Income and Job Loss in the U.S.,”
Journal of Family and Economic Issues
19 (Fall 1998): 255-283. However, more recent research has shown that wives’ entrance into the workforce is gradual, beginning one or more years before a husband’s job loss and continuing for multiple years after the job loss. When this is taken into account, a significant “added worker effect” has been documented. See Melvin Stephens Jr., “Worker Displacement and the Added Worker Effect,” National Bureau of Economic Research, Working Paper 8260 (April 2001).

5
See Stephens, “Worker Displacement and the Added Worker Effect.” Stephens found that the greater the number of children under age six, the less likely the wife was to increase her participation in the workforce. See also Jonathan Gruber and Julie Berry Cullen, “Spousal Labor Supply as Insurance: Does Unemployment Insurance Crowd Out the Added Worker Effect?” National Bureau of Economic Research, Working Paper 5608 (June 1996).

6
Black women living in areas of high unemployment are less likely to increase their participation in the workforce, presumably because of the difficulty in finding a job. See Yeung and Hofferth, “Family Adaptations to Income and Job Loss.”

7
A wife is significantly more likely to increase her hours in the workforce if her husband suffers a large wage loss than if he finds a new job with similar or higher wages. See Stephens, “Worker Displacement and the Added Worker Effect.” As the duration of a husband’s unemployment increased, the probability that his wife would enter the workforce nearly doubled. Craig B. Little, “Technical-Professional Unemployment: Middle-Class Adaptability to Personal Crisis,”
Sociological Quarterly
17 (Spring 1976): 262-274; interviews were conducted with 100 unemployed male technical-professional workers during the aerospace-defense-electronics recession of early 1972. See also Gruber and Cullen, “Spousal Labor Supply as Insurance,” in which the authors argue that unemployment insurance tends to crowd out spousal labor supply: “Our estimates imply that in the absence of [unemployment insurance], wives’ total hours of work would rise by 30% during their husbands’ spells of unemployment.”

8
See Stephens, “Worker Displacement and the Added Worker Effect.”

9
Shannon Brownlee, Matthew Miller, Susannah Fox, Amy Saltzman, Brendan I. Koerner, and Jason Vest, “Lies Parents Tell Themselves About Why They Work,”
U.S. News & World Report
, May 12, 1997.

10
William R. Johnson and Jonathan Skinner, “Accounting for Changes in the Labor Supply of Recently Divorced Women,”
Journal of Human Resources
23 (Fall 1988): 417-436; U.S. Census Bureau, Table F-7, Type of Family (All Races) by Median and Mean Income, 1947 to 2001. Available at
http://landview.census.gov/hhes/income/histinc/f07.html
[1/10/2003].

11
Robyn Stone, Gail Lee Cafferata, and Judith Sangl, “Caregivers of the Frail Elderly: A National Profile,”
Gerontologist
27 (October 1987): 616-626.

12
Sociologists have documented immediate adjustments families make during a period of unemployment, noting that families often reduce their food expenses or postpone major household purchases. See Rand D. Conger and Glen H. Elder Jr.,
Families in Troubled Times: Adapting to Change in Rural America
(New York: Aldine De Gruyter, 1994). See also Yeung and Hofferth, “Family Adaptations to Income and Job Loss,” pp. 269-276.